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Engineering Inc.

The Year of Engagement

ms consultants, inc.

July 5, 2017

ACEC Chairman Sergio “Satch” Pecori, chairman and CEO of Hanson Professional Services, Springfield, Illinois and the other ACEC Executive Committee members agree that “the outlook for our industry is bright.” The new administration is suggesting a trillion-dollar investment in infrastructure, streamlining regulations and tax benefits.

“But the industry still faces challenges in the way it conducts business, including our contracting modalities, and the use of technology,” says Pecori.

Chair-elect Manish Kothari, president and CEO of Sheladia Associates, Rockville, Maryland, adds “There needs to be a fundamental change about the way we think about our industry and the way we utilize technology to interact with our customers.”

TECHNOLOGY TAKEOVER

Technology and big data are driving forces that require transformation in engineering businesses, as well as clients’ businesses, according to Vice Chair Gayle Roberts, CEO of Stanley Consultants, Muscatine, Iowa. Every market sector can already see the technology wave that will impact its business. Technology will become a bigger part of a firms’ delivery platform, as Building Information Modeling and 3D modeling are now required on virtually all projects.

Cybersecurity and risk management are among the top challenges. “Every firm needs to start looking at cyber insurance and cyber risk. It’s almost affordable now—and it should be at the table,” says Vice Chair John Nelson, CFO of Wright-Pierce, Topsham, Maine. “All it takes is one data breach, and your company could have serious problems— particularly smaller companies.”

Sophisticated technologies also generate terabytes, even petabytes, of data the firms are challenged to store and share with clients. Vice Chair Joel Goodmonson, executive vice president of Architectural Engineers, Boston, began using laser scanners more than two years ago. Over time, he watched file sizes outgrow email attachment limits and then file-sharing apps. “Today, the files are so large that we download the files on 500-gigabyte external hard drives to be messengered to clients,” he says.

Roberts noted that “our ability to access, analyze and use big data will allow us to solve complex problems. This will be a much different workforce, and we may move away from saying we provide ‘engineering solutions.’ We are in the technology solutions business.”

No doubt, technology is expensive, and many clients continue to pay on an hour basis versus a value or performance basis, which challenges how firms institute greater efficiency and employ new technologies.

“We have to get away from that because it doesn’t drive innovation. We have to have something that allows us to charge lump sum,” says Pecori. “What we need to do is educate our clients into working on lump sum.” Lump sum, where firms charge by milestones, would allow them to come up with the most efficient and innovative ways to spend project dollars, according to Pecori.

Technology’s overall impact on the engineering industry has many unknowns, says Vice Chair Michael McMeekin, president of Lamp, Rynearson & Associates, Omaha, Nebraska. “Continual software advancements automate lots of design process that were previously done by hand or with less sophisticated software. This will impact jobs in the industry,” McMeekin says. “Then there are technology conglomerates such as Amazon, Microsoft and Google that are at the forefront of advances in technology, including infrastructure-related ventures such as autonomous vehicles and smart-cities,” he says. “In the long-term, the overriding question is where will our industry come out as technology advances? Will engineering have a leadership role in the development of new technology, or will technological advances continue to come from outside of our industry?”

STATE BY STATE

Many states have their own unique technology challenges. Dave Bender, executive director of ACEC/Illinois and NAECE President, says innovation and technology are stifled or held back in many states due to strict procurement laws, which prevent consultants from having a meaningful dialogue with their government clients. This short-changes clients and the taxpayers from receiving the best infrastructure and technology as a final project. In 2009, Illinois enacted new procurement laws that limit communication with state employees by those who are in the process of filing for, or obtaining, a state contract.

“Many times our government clients are the last people that are aware of what’s out there as far as technology or practices,” Bender says. “If you were submitting for a project, you could not discuss anything with them because it would be seen as trying to gain influence or special favor.” ACEC/Illinois is trying to reach state agencies through noncontract-related industry meetings, liaison committee meetings and educational opportunities that help them understand today’s technology options.

ECONOMIC CHALLENGES

Undercapitalization or lack of funds for infrastructure is a huge problem around the nation and for our industry, says Vice Chairman Mary Erchul, project manager at Ghirardelli Associates in Irvine, California.

“When people don’t have money they get nervous, and if they don’t feel there’s a funding path for infrastructure, they stop planning for it—which is terrible,” Erchul says. “That’s the worst thing you can do. It’s true of firms, too. If you want to grow your firm and you stop planning for that because you don’t have the cash flow, that’s when you get hit—you’re contracting when you should be expanding. Firms and the public need to be more open to investing in the future.”

Firms are also juggling a business boom with the economics of hiring, says Vice Chair Thomas Mosure, president and board chairman at MS Consultants, Columbus, Ohio. “As you grow, so does your need for capital and resources. Every new employee costs $8,000 to $10,000 just to fit them with hardware, software and the things they need to do business. So developing talent becomes an economic item on your balance sheet, along with finding a workspace for them,” he says. Mosure’s firm added 60 employees last year.

Furthermore, the perennial shortage of engineering talent still plagues firms. At the same time, they are getting pressured by higher salaries while also managing clients who want the work done cheaper and faster, Nelson says. “We all need to offer our clients higher value, whether that’s better, cheaper, long-term cost solutions that others aren’t offering, or technologies that customers are willing to pay for,” he says.

ALTERNATE DELIVERY MODELS

Alternative delivery models, such as design-build and public-private partnerships, also bring a host of risk factors that firms must recognize and control, says Vice Chair Charles Gozdziewski, executive chairman at Hardesty & Hanover, New York.

“They are becoming a bigger percentage share of our revenue, and each one has its own risk that we have to adjust to,” he says. “It could be a one-time relationship, which is bottom-line oriented and not relationship building. In all these delivery systems, there are gray areas that are controversial and that impact engineering’s bottom line such as what part of the project is actual design and what part is actual construction support services.”

Gozdziewski’s firm employs a full-time risk manager who gets involved in contract language, terms and conditions. “We weigh that into the decision of a go or no-go. The cost of hiring a risk manager is worth it because it will cost you more if you don’t have one,” he says.

“We need to make sure we have our people trained so we don’t have an outcome that we’re not accustomed to,” says Pecori. “You already have a number that you’re working to, as opposed to trying to get to an outcome that the owner might want that might cost more than the price point you were given. There needs to be some pushback in some areas where perhaps there wasn’t pushback in the past.”

SOCIAL ISSUES

In addition to managing risk and barriers to technology, today’s firms need to take the lead in tackling a diverse list of social issues—including workplace, community and political matters— and to help bring about change.

McMeekin is concerned by the increasing lack of respect for true science in society and in public policy. “Policy issues that should be debated on the basis of scientific facts and research become political issues. Spin doctors and public relations experts are given equal voices as professional engineers and scientists,” he says. “You see this in policy debates about climate change, air quality, water quality and ecosystems. Policies that would address these issues, improve the environment and our communities, and benefit our businesses become clouded and fail to gain the support they deserve.”

To address these and other issues facing the industry, Bender urges engineers and their firms to be leaders in the public policy arena. “We need engineers to become city council members, county supervisors or board members, mayors, members of the state General Assembly and even members of Congress,” Bender says. “We simply cannot sit back and wait for things to come to us. We need to lead these discussions.”

RETHINKING THE WORKPLACE

These changing social dynamics of the workplace are requiring firms to relax some office policies—and not just for millennials, Mosure says. “I think all people generally want more flexibility in their work environment and possibly working from home,” says Mosure. “A company has to develop policies that allow social changes as they’re occurring in people’s lives. Balance what they need to be happy with what you need as a company to be able to get the work done and make a great culture.”

Erchul encourages firms to embrace generational differences. “Millennials tend to be more work-life balanced people. They like to give back to their communities,” says Erchul. “I find they have a lot to bring to the table. They get the technology and understand the power of social media. Instead of looking at them and saying ‘I don’t get it,’ we need to bring their strengths and our strengths together and create a superpower.”

Goodmonson’s firm is looking for ways to help new hires balance the financial challenges they face today with the equity opportunities they will have tomorrow. “We’re looking at hiring new grads that will have college debt in excess of $100,000. There’s a certain sensitivity that we’ve got to have for folks that are starting out with a mountain of debt and how we are moving them along,” Goodmonson says. “In 10 to 12 years, when you want them to buy your firm’s stock, they’re just getting out from under the debt of their student loans and have no money to invest in the firm.”

The firm is also trying to head off the problem by bringing in about 15 percent of the total headcount in paid interns each summer. “It helps potential future employees pay their loan debts as they go and helps them fall in love with the career without the stress,” he says.

“Close relationships with our clients, a deep level of trust, and our ability to understand our client markets and provide out- standing service will continue to be a bedrock of our industry,” Roberts says. “Despite challenges our firms face, we will thrive if we defend and protect our client relationships.”

ACEC President and CEO Dave Raymond notes that “the expertise and perspectives of the new ExCom position the Council to effectively represent and serve our members’ interests.”